Northern Ireland’s economy is closely bound to that of the rest of the United Kingdom. Although historically the economic links between Northern Ireland and its closest neighbour, the republic of Ireland, were remarkably underdeveloped, trade between the two has grown substantially. Compared with the rest of the United Kingdom, the economy of Northern Ireland has long suffered, largely a result of political and social turmoil. To spur economic development, in the 1980s the British and Irish governments created the International Fund for Ireland, which disburses economic assistance to the entire island, with significant resources going to Northern Ireland. Northern Ireland also receives economic assistance from the European Union.

Agriculture, forestry, and fishing

While agriculture historically played an important part in the economy of Northern Ireland, its significance has declined greatly over recent decades. As in other developed societies, the introduction of new technologies has accelerated a process of consolidation, and there are now fewer but substantially larger and more productive farms. In the process, agriculture has become a relatively insignificant source of employment. At the beginning of the 21st century, less than 5 percent of people in Northern Ireland earned a living from the land, though about three-fourths of the total land area was used for agriculture, forestry, and livestock.

Northern Ireland’s frequent rainfall, humidity, and prospect of wet harvests discourage arable farming, but local conditions produce good grass and rich pasture. Nearly all grassland is plowed, and there is little “rough grazing.” Mixed farming was traditionally universal, but there has been a considerable movement toward specialization. Nearly half the farms concentrate on sheep and beef, and about one-fifth specialize in dairying. Principal crops include potatoes, barley, wheat, and oats; turnips are grown to feed livestock. The production of grass seed and seed potatoes for export is also important. To the south of Lough Neagh lies a rich orchard country, and apple growing and market gardening are constant features of the landscape. Most of the agricultural land is held by the occupiers in fee simple, but there persists the peculiar feature of conacre, a system of short (11-month) lets, on a portion of the agricultural land. About two-thirds of the farmers are “working owners.”

Forestry is not an important industry in Northern Ireland, as much of the native forests were cleared by the end of the 19th century. At the beginning of the 20th century, with about 1 percent of the land forested, the government encouraged reforestation. In 1919 the Forestry Commission was established to develop policy, and afforestation efforts occurred throughout much of the 20th century. By the end of the century, about 200,000 acres (81,000 hectares) were forested, with about three-fourths of the woodland administered by the Forestry Service. Most of the limited timber production, which accounts for a tiny fraction of employment and gross domestic product (GDP), occurs on state-owned lands.

Ocean fishing is more or less confined to the northern Irish Sea and is limited to trawlers that operate primarily from the ports of Kilkeel, Ardglass, and Portavogie. Prawns, cod, whiting, and herring are among the main catches. There has been increasing development of marine farming, particularly for oysters. Inland, salmon and eel fishing is traditional, the latter concentrated where the River Bann leaves Lough Neagh.

Resources and power

Northern Ireland is not rich in minerals, and mining contributes little to the economy. Less than 1 percent of workers are employed in mining. Among the minerals found are basalt, limestone, chalk, clay, salt, and shale, and there is some iron ore, bauxite, and coal. Hydroelectric resources are not significant, and peat is used as a domestic source of fuel. There are also limited petroleum and natural gas reserves. In the early 21st century an electrical interconnector with Scotland was built to connect Northern Ireland to the European grid, and the interconnector with the grid in the Irish republic has been restored. The commissioning of a gas pipeline to Scotland has opened up a new was restored. Indeed, in 2007 the Single Electricity Market (SEM) began operation, providing a single wholesale market for electricity for the whole island of Ireland. The Scotland to Northern Ireland Pipeline (SNIP) transmits natural gas, providing an important industrial and domestic energy source. There are also plans to connect with the natural gas grid in the Irish republicA gas pipeline completed in 2006 runs from Dublin to Antrim, and another completed in 2004 connects Derry with a point near Carrickfergus.

Manufacturing

During the 19th century the counties that would eventually form Northern Ireland underwent a rapid process of industrialization. In the decades before World War I, the Lagan valley formed with Merseyside and Clydeside a network that was the heart of the British imperial economy. Belfast became the site of many linen mills, rope factories, and heavy engineering concerns. For a time the city produced a greater tonnage of shipping than any other port in the world.

The 20th century, in contrast, was marked by a slow though inexorable industrial decline. Although this trend was reversed somewhat by the outbreak of World War II, the structural weakness of Northern Irish manufacturing became increasingly apparent in the decades that followed. In the mid 1960s the government offered inducements to multinational corporations to invest in Northern Ireland, but, while many foreign companies agreed to establish factories there, the new approach failed to stem the collapse of the manufacturing sector in the last decades of the century.

Two principal factors are responsible for the deindustrialization of Northern Ireland. First, the sustained political violence that overtook the region in the late 1960s has undermined local manufacturing. Ultimately, the executives of multinational corporations have proved reluctant to establish branch plants in a part of the developed world that has become synonymous with political upheaval. Second, the industrial collapse of Northern Ireland must be seen in the wider context of the reconstruction of the global economy. Since the oil price rises of the early 1970s, Western corporations have systematically closed factories in developed societies and transferred production to low-wage economies in the less-developed world. Like the economic life of many other developed countries, that of Northern Ireland has essentially become postindustrial. Indeed, many of the factories that drove Northern Ireland’s industrial economy at its height now stand idle or await conversion to luxury apartments. The shipyards in Belfast stumble from one threatened closure to the next. At the end of the 20th century the manufacturing sector that once employed more than half the Northern Irish workforce provided work for less than one in five.

Finance

Unified fiscally with the United Kingdom, Northern Ireland’s official currency is the British pound sterling. The three primary revenue sources include a share of the United Kingdom’s revenue from customs and excise, income, value-added, and capital gains taxes, as well as the national insurance surcharge; nontax revenue collected locally, such as rates (contributions toward the cost of government services) and property taxes; and specific and nonspecific payments from the United Kingdom, which have become increasingly important since the onset of political unrest in the late 1960s. At the end beginning of the 20th 21st century, subsidies from the British Treasury accounted for about twonearly one-fifths third of Northern Ireland’s GDP.

Trade

Most of Northern Ireland’s imports come from, and exports go to, other parts of the United Kingdom. The republic of Ireland is Northern Ireland’s primary external trading partner and its leading export market. However, Northern Ireland has consistently run a trade deficit with its southern neighbour. Other major trading partners include Germany, France, the Netherlands, and the United States. In the first decade of the 21st century, exports generally decreased to the European Union but increased to the rest of Britain, the republic of Ireland, and the rest of the world. Among the country’s principal exports are textiles, food and beverages; transport equipment; computer, and electrical, and optical equipment; and chemicals and chemical products.

Services

As manufacturing dwindled in significance, the service sector emerged as the linchpin of the Northern Irish economy and now provides about three-fourths of jobs. Retailing, financial services, and real estate are particularly important sources of local private employment; however, the growth of the tertiary sector is also largely due to the expansion of public services that began in the early 1970s. Indeed, it has been suggested that as many as two out of three in the Northern Irish workforce are employed directly or indirectly by the state, especially in the fields of health, education, administration, and security. Because of the political violence that plagued Northern Ireland, for much of the late 20th century the tourist industry was virtually nonexistent. With the signing of the peace agreement between nationalists and unionists in the late 1990s, however, the tourist industry became an important job creator and revenue generator, though the sector accounted for less than . By the first decade of the 21st century, tourism accounted indirectly for nearly 5 percent of GDP and continued to suffer because of intermittent violenceemployment. The vast majority of tourists come from other areas of the United Kingdom and Ireland, but a significant number also visit from the United States, Canada, and Australia.

Labour

Local trade unions are affiliated with the Irish Congress of Trade Unions through its Northern Ireland Committee. Most union members belong both to unions associated with this organization and to British-based unions affiliated with the Trades Union Congress.

Transportation

One of the more noteworthy features of the countryside of Northern Ireland is a close network of well-maintained roads that connects all parts of the region. Public road transport outside the Belfast municipal service has been nationalized since 1935, and since 1968 the Northern Ireland Transport Holding Company (formerly the Ulster Transport Authority) has also controlled the railways, bus companies, and Belfast airport. The railways diminished rapidly—from 824 miles (1,326 km) to about one-fourth that figure—in the economic reorganization following nationalization. Inland waterways have almost disappeared, although a little commercial traffic still uses the Lower Bann Navigation to Coleraine, and there is some recreational sailing.

Northern Ireland is well connected to the other regions of the United Kingdom by both sea and air. Belfast is one of the major ports in Britain and Ireland and has several miles of quays with modern container-handling facilities. Larne and Derry are the other ports of significance. Coleraine and Warrenpoint handle some freight, and Larne and Belfast handle passenger transport. The Belfast International Airport, near Aldergrove, has regular air service to major cities in Britain, Europe, and North America. A more recently built, though smaller, airport located in Belfast The smaller George Best Belfast City Airport has become increasingly popular with commuters traveling to Great Britain and elsewhere.